Landlord Mistakes- No Good Deed Goes Unpunished Today I have another guest post on landlord mistakes from Debbie Vornholt of Commonsense Landlording. Today’s article is “No Good Deed Goes Unpunished”. It’s a case study on why you shouldn’t break your own rules, and the consequences for the landlord if you do. Any landlord will tell […]
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Are you contemplating investing in property? However you don’t have enough money to do so. Here is a tip you may use as long as the person selling the property is willing to negotiate along.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your very best wager is to locate a property that the owner has great interest in selling, whether because they are moving, a divorce settlement, or they are frustrated with tenants.
Actually, if you are currently renting and thinking about using this strategy perhaps your landlord would be glad to help you out! There are several variations that could be used depending upon you and your vendor. Do they want the market price or are they just desperate to get out of the monthly payments – maybe facing foreclosure?
The easiest method is to take over their mortgage repayments – called ‘assuming’ the mortgage. You will have to be approved by the first lender to presume the mortgage. If you can’t get approved for an assumable mortgage you may also try a ‘subject to’ assumption where you merely make repayments while the property remains in the seller’s name.
You take over the first mortgage and make a 2nd mortgage on the remaining cost of the house with the seller. Offer a high, interest-only payment for a short time frame – two or 3 years. Instead of having the money stay in a bank they can be getting a high interest over 2 or 3 years with the rest due in full at the end of the term.
When the term ceases you should be able to refinance the cost, or perhaps you can sell. Unless you hit an actual bad market the value of the home should have risen by then.
Most mortgage lenders merely need to make a great investment. While your local bank could still be lacking confidence there are lots of financial lenders that would wish to make a deal. Financiers like real estate. The mortgage is usually around 60-70% of the value of the property, so as long as they understand they get their money back in the value of the estate if you default, they do not care what kind of income you make. Conclude the deal with a second mortgage done with the seller. In case you default they can still foreclose on the property and sell it, settling the existing mortgage with the proceeds.
Now you can see the whole picture. It is good that seller and buyer can work hand in hand. In the event that they can’t wait for a sale, you may still give them their asking price with a little versatility on their part.